PART I This part provides a comprehensive overview of Mistras Group's business, including its solutions, market dynamics, competitive strengths, growth strategy, and financial performance. [ITEM 1. BUSINESS](index=3&type=section&id=ITEM%201.%20BUSINESS) Mistras Group provides global technology-enabled asset protection solutions for critical infrastructure, offering a 'OneSource' portfolio of services, products, and data management, with 2019 revenues of **$748.6 million**. [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to risks and uncertainties, advising readers to consult risk factors. - The report contains **forward-looking statements** based on current expectations and projections, subject to known and unknown **risks and uncertainties** that could cause actual results to differ materially[11](index=11&type=chunk) - Readers are advised to consult **risk factors** and management's discussion and analysis, and the company disclaims any obligation to revise or update **forward-looking statements**[12](index=12&type=chunk) [Our Business](index=4&type=section&id=Our%20Business) Mistras Group offers 'OneSource for Asset Protection Solutions' globally, providing technology-enabled solutions to ensure the safety and integrity of critical infrastructure. - **Mistras Group** provides '**OneSource for Asset Protection Solutions®**' globally, focusing on **technology-enabled solutions** to evaluate the **safety**, **structural integrity**, and **reliability** of **critical energy**, **industrial**, and **public infrastructure**[13](index=13&type=chunk) - These **solutions** aim to maximize **safety** and uptime, ensure **compliance** with **regulations**, extend **asset life**, increase **productivity**, minimize repair costs, and manage **risk**[14](index=14&type=chunk) - Specialized **asset protection solutions** include: **Field Inspections**, **Consulting**, **Maintenance**, **Data Management**, Access, **Monitoring**, Laboratory **Quality Assurance/Control (QA/QC)**, and **Equipment**[15](index=15&type=chunk) - The '**OneSource**' model integrates these **solutions** across the **asset lifecycle**, with many customers outsourcing **inspection** and **integrity data management** on a 'run-and-maintain' basis[15](index=15&type=chunk) [Our Specialized Solutions](index=5&type=section&id=Our%20Specialized%20Solutions) Mistras offers a comprehensive suite of integrated asset protection solutions, combining services, products, data management, and technologies for diverse customer needs. - **Mistras** offers a comprehensive suite of integrated **asset protection solutions**, combining **services**, **products**, **data management**, and **technologies** to meet diverse customer needs, from routine **inspections** to complex **asset integrity management**[18](index=18&type=chunk) [Field Inspections](index=5&type=section&id=Field%20Inspections) This section details the company's field inspection services, including traditional and advanced NDT techniques, predictive maintenance, and automated data acquisition solutions. - Portfolio includes traditional and advanced **Non-Destructive Testing (NDT)** techniques, **predictive maintenance (PdM)** assessments, and **inline inspection (ILI)** for pipelines[19](index=19&type=chunk) - **NDT** allows examination of **assets** without impacting **integrity**, crucial for detecting issues like corrosion, cracking, and leaks in **industrial assets**[20](index=20&type=chunk) - Automated **data acquisition solutions** use smart sensing, robotic **systems**, and digitized spot **inspections** for enhanced **asset integrity data**[21](index=21&type=chunk) [Consulting](index=5&type=section&id=Consulting) The company provides engineering consulting services for process equipment and facilities, including Asset Integrity Management/Mechanical Integrity (AIMS/MI) services. - Provides engineering **consulting services** for process **equipment**, **technologies**, and facilities, including plant **operations** support, turnaround planning, and profit improvement[23](index=23&type=chunk) - **Asset Integrity Management/Mechanical Integrity (AIMS/MI) services** enhance **asset reliability** and **regulatory compliance** through systematic, engineering-based approaches[24](index=24&type=chunk) [Maintenance](index=6&type=section&id=Maintenance) The company performs maintenance and light mechanical services, often complementing inspection services, utilizing multi-disciplined technicians for hard-to-access areas. - Performs **maintenance** and light mechanical **services**, such as corrosion removal, insulation work, electrical **services**, and welding, often complementing **inspection services**[25](index=25&type=chunk) - Multi-disciplined technicians offer **services** in hard-to-access areas using rope access or diving strategies[26](index=26&type=chunk) - Mechanical **services** remain a small part of the business, carefully avoiding conflicts with **inspection services**[26](index=26&type=chunk) [Data Management](index=6&type=section&id=Data%20Management) Mistras offers integrated data management solutions, including its proprietary PCMS™ software and MISTRAS Digital™ platform, for asset protection data collection, storage, and analysis. - Offers integrated **data management solutions** across the **asset protection cycle**, including collection, storage, visualization, and analytics[27](index=27&type=chunk) - Proprietary **Plant Condition Management Software (PCMS™)** is widely used in North American refineries (**estimated 50% of U.S. refining capacity**) for **inspection data storage**, organization, and analysis, providing recurring fees and marketing opportunities[28](index=28&type=chunk)[30](index=30&type=chunk) - **MISTRAS Digital™ platform** digitizes field **inspection data transfer**, captures results, and provides electronic reporting, integrating with **PCMS** and **cloud-based monitoring portals** for real-time access[32](index=32&type=chunk) [Access](index=6&type=section&id=Access) The company specializes in accessing hard-to-reach locations using various methods like scaffolding, rope access, and unmanned systems to minimize human intervention. - The company specializes in accessing hard-to-reach locations (at-height, subsea, confined spaces) using scaffolding, rope access, certified divers, and unmanned aerial/land/subsea **systems** to minimize human intervention in unsafe areas[33](index=33&type=chunk) [Monitoring](index=7&type=section&id=Monitoring) Mistras provides online condition-monitoring solutions for real-time reports and analysis, utilizing a flexible, IIoT-compatible, cloud-based monitoring portal. - Provides online condition-**monitoring solutions** for real-time reports and analysis, alerting personnel to damages before critical failures[34](index=34&type=chunk) - Utilizes a flexible, **IIoT-compatible**, **cloud-based monitoring portal** to centralize and analyze collected **data**, enhancing **safety** by reducing the need for technicians in hazardous locations[35](index=35&type=chunk) - Offers continuous, periodic, and conditional **monitoring** for various **assets** and applications, including tube leaking, power transformer health, and bridge structural health[36](index=36&type=chunk) [Laboratory Quality Assurance/Control (QA/QC)](index=7&type=section&id=Laboratory%20Quality%20Assurance%2FControl%20(QA%2FQC)) The company operates a network of in-house laboratories offering QA/QC solutions for metal, alloy, and composite components, holding various certifications and OEM approvals. - Operates a network of in-house laboratories in North America and Europe, offering **QA/QC solutions** for new and existing metal, alloy, and composite components[37](index=37&type=chunk) - **Services** include **non-destructive evaluation/inspection (NDE/NDI)**, **destructive testing (DT)**, metallurgical testing, chemical analysis, and finishing **services**[38](index=38&type=chunk) - Labs hold various certifications (e.g., **Nadcap**, **AS9100/ISO-9001**, **FAA Repair Station**) and approvals from major **OEMs**, **prime contractors**, and militaries[39](index=39&type=chunk) [Equipment](index=8&type=section&id=Equipment) Mistras designs and manufactures portable, handheld, wireless, and turnkey NDT equipment, sensors, and software, specializing in acoustic emission (AE) and ultrasonic testing (UT) products. - Designs and manufactures portable, handheld, wireless, and turnkey **NDT equipment**, sensors, and **software** for spot **inspections** and long-term **monitoring**[41](index=41&type=chunk) - Sells individual components or complete **systems**, including integrated service-and-system **technology packages** utilizing proprietary testing procedures and advanced **software**[42](index=42&type=chunk) - A leader in **acoustic emission (AE) products** and also designs/manufactures **ultrasonic testing (UT) equipment**, with most hardware produced in its **ISO-9001-certified Princeton Junction facility**[43](index=43&type=chunk)[44](index=44&type=chunk) [Centers of Excellence](index=8&type=section&id=Centers%20of%20Excellence) Centers of Excellence provide specialized support for asset, technology, or industry-specific solutions, leveraging subject matter experts for strategic sales and standardized approaches. - **Centers of Excellence (COEs)** provide specialized support for **asset**, **technology**, or industry-specific **solutions**, leveraging subject matter experts for strategic sales and standardizing approaches to common problems in key market segments[45](index=45&type=chunk) [Asset Protection Industry Overview](index=8&type=section&id=Asset%20Protection%20Industry%20Overview) The asset protection industry is shifting towards integrated solution providers with advanced NDT and data acquisition capabilities, crucial for critical infrastructure integrity. - **Asset protection** is crucial for **critical infrastructure integrity**, with **NDT** being a prominent **solution**[45](index=45&type=chunk)[46](index=46&type=chunk) - The **industry** is shifting from small regional vendors to integrated **solution providers** with advanced **NDT** and **data acquisition capabilities**[46](index=46&type=chunk) - Vendors offering integrated **solutions**, scalable **operations**, skilled personnel, and a global footprint, especially those delivering advanced **solutions** and **data analytics**, gain a **significant competitive advantage** and recurring revenues[47](index=47&type=chunk) [Key Dynamics of the Asset Protection Industry](index=9&type=section&id=Key%20Dynamics%20of%20the%20Asset%20Protection%20Industry) This section outlines key industry drivers including aging infrastructure, outsourcing, corrosion, advanced materials, safety regulations, expanding markets, and crude oil prices. - **Aging Infrastructure & Increased Utilization**: High costs of new **infrastructure** lead to extending the life of existing **assets**, increasing demand for frequent **inspection** and **maintenance**[48](index=48&type=chunk) - **Outs

Financial Data and Key Metrics Changes - The company reported consolidated revenue of $748.6 million for 2019, a modest increase from $742.4 million in 2018, with acquisitions contributing 3.7% to revenue growth, offset by a 3% decline from discontinued contracts and a 1.5% negative impact from foreign exchange [34] - Gross profit increased to $217.3 million from $207.9 million, with gross profit margin improving by 100 basis points to 29% [35] - Free cash flow rose by 76% year-over-year to $36.2 million, compared to $20.5 million in the previous year [39] Business Line Data and Key Metrics Changes - All three segments of the business improved their gross margins over the past two years, contributing to overall gross margin expansion [23] - The company maintained a modest 1.8% increase in SG&A expenses, with core SG&A expenses declining nearly 3% year-over-year after accounting for acquisition-related costs [36] Market Data and Key Metrics Changes - The company experienced a 1% decline in consolidated revenues for Q4 2019, with organic revenue down 2.6% and a 0.7% decline due to unfavorable effects, partially offset by acquisition growth of 2.3% [41] - The company anticipates a mid-teens percentage decline in revenue for Q1 2020 due to the impact of COVID-19 and low crude oil prices [49] Company Strategy and Development Direction - The company is strategically expanding into complementary growth markets, including midstream and aerospace, while investing in digital initiatives to leverage its capabilities [53] - The focus remains on improving returns by shutting down underperforming business units and enhancing productivity [54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate positive cash flow for the full year of 2020 despite the challenges posed by COVID-19 [15] - The company refrained from providing full-year guidance due to the uncertainty surrounding market conditions and the ongoing pandemic [48] Other Important Information - The company has established a dedicated virus response team to manage workforce safety and customer operations during the pandemic [7] - The leverage ratio was approximately 3.6 times as of December 31, 2019, compliant with credit agreements, with a deferral granted for leverage step-downs [46] Q&A Session Summary Question: Impact of deferred projects on 2020 - Management indicated that some projects are being delayed by 2 to 6 weeks, with few completely canceled, as customers are reducing hours and limiting outside personnel [66] Question: Updates on aerospace and midstream markets - Aerospace business is holding up well, with most customers considered essential, while midstream efforts are progressing, though the situation remains fluid [75] Question: Visibility on revenue for Q2 - Management noted decent visibility for Q2 but emphasized the fluidity of the situation, particularly in Europe due to lockdowns [102][104]

Mistras Group, Inc. (NYSE:MG) Q3 2019 Earnings Conference Call November 5, 2019 9:00 AM ET Company Participants Nestor Makarigakis - Group Director, Marketing Dennis Bertolotti - President and CEO Edward Prajzner - SVP and CFO Sotirios Vahaviolos - Founder and Executive Chairman Jonathan Wolk - Senior EVP and COO Conference Call Participants Edward Marshall - Sidoti & Company David Ridley-Lane - Bank of America Tate Sullivan - Maxim Group Edward Marshall - Sidoti & Company Operator Good morning ladies and g ...

PART I—FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) The company's financial statements for the period ended September 30, 2019, reflect total assets of $728.0 million, revenue of $569.6 million, and net income of $5.2 million, with operating cash flow at $40.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 (unaudited) | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $14,372 | $25,544 | | Total current assets | $192,950 | $202,791 | | Goodwill | $283,121 | $279,259 | | Total assets | $728,027 | $694,037 | | Total current liabilities | $111,243 | $100,471 | | Long-term debt, net | $260,753 | $283,787 | | Total liabilities | $449,681 | $422,963 | | Total equity | $278,346 | $271,074 | Condensed Consolidated Statement of Income Highlights (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $192,192 | $182,169 | $569,595 | $561,592 | | Gross Profit | $57,769 | $52,332 | $166,714 | $155,559 | | Income from Operations | $10,779 | $3,017 | $21,802 | $19,720 | | Net Income (Loss) Attributable to Mistras | $3,093 | $(1,011) | $5,231 | $7,897 | | Diluted EPS | $0.11 | $(0.04) | $0.18 | $0.27 | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $40,476 | $24,184 | | Net cash used in investing activities | $(21,628) | $(9,831) | | Net cash used in financing activities | $(29,521) | $(23,905) | | Net change in cash and cash equivalents | $(11,172) | $(10,468) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, including the adoption of ASC 842, a $4.8 million acquisition, and a $5.9 million multi-employer pension withdrawal liability, alongside segment performance and debt structure information - The company is a global provider of technology-enabled asset protection solutions, serving industries like oil and gas, aerospace, power generation, and public infrastructure[24](index=24&type=chunk) - On January 1, 2019, the Company adopted the new lease accounting standard (ASC 842), resulting in the recognition of a right-of-use (ROU) asset and liability of approximately **$38 million** for its operating leases[34](index=34&type=chunk)[36](index=36&type=chunk) - During the nine months ended September 30, 2019, the company completed one acquisition for **$4.8 million** in cash and up to **$4.3 million** in contingent consideration, providing pipeline integrity management software and services[67](index=67&type=chunk) - The company recorded a charge of **$5.9 million** in Q3 2018 for a probable withdrawal liability from a multi-employer pension plan, with an additional **$0.5 million** recorded in the first nine months of 2019, leaving an estimated remaining liability of approximately **$3.1 million** as of September 30, 2019[116](index=116&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=31&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results, noting a 6% revenue increase in Q3 2019 and improved gross profit margin, detailing segment performance, the Onstream acquisition impact, and special items affecting operating income, while confirming sufficient liquidity with $40.5 million in operating cash flow and $131.4 million available credit [Overview](index=31&type=section&id=Overview) The company provides 'OneSource for Asset Protection Solutions®' for critical infrastructure across oil & gas, aerospace, and power generation, driven by aging infrastructure, outsourcing, and stricter regulations, operating through Services, International, and Products and Systems segments - The company's business model focuses on providing a comprehensive portfolio of customized solutions to help customers maximize safety, comply with regulations, and extend asset life[133](index=133&type=chunk) - Key market trends supporting the business include the need to extend the life of aging infrastructure, outsourcing of technical services, and increasing safety regulations[145](index=145&type=chunk)[146](index=146&type=chunk)[149](index=149&type=chunk) - The December 2018 acquisition of Onstream provides a strong foundation in the midstream oil and gas market with its inline inspection capabilities and digital software solutions[144](index=144&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Q3 2019 revenue increased **6%** to **$192.2 million** with gross profit margin improving to **30.1%**, while nine-month revenue grew **1%** to **$569.6 million**, and GAAP income from operations significantly increased to **$10.8 million** despite prior-year pension charges Revenue by Segment (in thousands) | Segment | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Services | $152,572 | $141,340 | $454,079 | $434,653 | | International | $37,050 | $36,671 | $109,302 | $116,238 | | Products and Systems | $5,521 | $5,716 | $13,222 | $17,286 | | **Total** | **$192,192** | **$182,169** | **$569,595** | **$561,592** | Gross Profit Margin by Segment | Segment | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Services | 28.4% | 27.5% | 28.2% | 26.2% | | International | 31.6% | 29.7% | 30.3% | 29.5% | | Products and Systems | 49.6% | 45.6% | 43.9% | 44.6% | | **Total Company** | **30.1%** | **28.7%** | **29.3%** | **27.7%** | - Q3 2018 income from operations was significantly impacted by a **$5.9 million** pension withdrawal expense and **$2.8 million** in reorganization costs in the International segment[169](index=169&type=chunk) - Interest expense increased to **$10.1 million** for the nine months of 2019 from **$5.6 million** in 2018, primarily due to higher borrowing levels for the acquisition completed in Q4 2018[177](index=177&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily from operations, cash balances, and its credit facility, with net cash from operations increasing **67%** to **$40.5 million** for the nine months ended September 30, 2019, and **$131.4 million** available under its credit facility, while remaining in compliance with all debt covenants - Cash provided by operating activities increased by **$16.3 million (67%)** to **$40.5 million** in the first nine months of 2019 compared to the same period in 2018, mainly due to working capital movements[179](index=179&type=chunk)[180](index=180&type=chunk) - As of September 30, 2019, the company had **$14.4 million** in cash and cash equivalents and **$131.4 million** available for borrowing under its credit facility[184](index=184&type=chunk) - The company was in compliance with all financial covenants of its Credit Agreement as of September 30, 2019[185](index=185&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no significant changes to its quantitative and qualitative disclosures regarding market risk compared to its 2018 Annual Report on Form 10-K - There have been no significant changes to the Company's disclosures about market risk as discussed in the 2018 Annual Report[189](index=189&type=chunk) [Controls and Procedures](index=41&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2019, the CEO and CFO concluded that the Company's disclosure controls and procedures are effective[190](index=190&type=chunk) - No changes occurred during the quarter ended September 30, 2019, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[191](index=191&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=43&type=section&id=ITEM%201.%20Legal%20Proceedings) The company refers to Note 14 of the financial statements for legal proceedings, reporting no material developments since the 2018 Annual Report beyond those disclosed therein - For details on legal proceedings, the report refers to Note 14–Commitments and Contingencies in the financial statements[193](index=193&type=chunk) [Risk Factors](index=43&type=section&id=ITEM%201.A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the 2018 Annual Report[194](index=194&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities, disclosed shares acquired from employees for tax withholding on vested restricted stock units, and terminated its share repurchase plan effective April 1, 2019 - The company's share repurchase plan, which had **$25.1 million** remaining, was terminated by the Board of Directors effective April 1, 2019[198](index=198&type=chunk) - During the quarter, the company acquired shares from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units[197](index=197&type=chunk) [Defaults Upon Senior Securities](index=43&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None reported[199](index=199&type=chunk) [Mine Safety Disclosures](index=43&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[200](index=200&type=chunk) [Other Information](index=43&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information for this item - None reported[201](index=201&type=chunk) [Exhibits](index=44&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and XBRL interactive data files[202](index=202&type=chunk)

MISTRAS Group, Inc. (NYSE:MG) Q2 2019 Results Earnings Conference Call August 6, 2019 9:00 AM ET Company Participants Nestor Makarigakis - Group Director, Marketing Dennis Bertolotti - President and Chief Executive Officer Edward Prajzner - Senior Vice President, Chief Financial Officer and Treasurer Jonathan Wolk - Senior Executive Vice President and Chief Operating Officer Conference Call Participants Tahira Afzal - KeyBanc Capital Markets David Ridley-Lane - Bank of America Merrill Lynch Chip Moore - Can ...

Financial Performance - Revenues for Q2 2019 were $200.6 million, an increase of $8.8 million, or 5%, compared to Q2 2018[154] - Gross profit for Q2 2019 was $60.1 million, representing 29.9% of revenue, up from 28.7% in Q2 2018[153] - Operating expenses for Q2 2019 were $44.7 million, or 22.3% of revenue, down from 23.3% in Q2 2018[153] - Income from operations for Q2 2019 was $15.4 million, or 7.7% of revenue, compared to 5.4% in Q2 2018[153] - Net income for Q2 2019 was $7.4 million, an increase from $6.0 million in Q2 2018[153] - Revenues for the first half of 2019 were $377.4 million, a decrease of $2.0 million, or 1%, compared to the first half of 2018[154] - Total revenues for the three months ended June 30, 2019, increased by 5% to $200.6 million, compared to $191.8 million for the same period in 2018[156] - For the six months ended June 30, 2019, total revenues decreased by 1% to $377.4 million, with services segment revenues increasing by 3%[158] - The gross profit margin for the six months ended June 30, 2019, was 28.9%, an increase from 27.2% in 2018[162] Segment Performance - Services segment revenues rose by 9% to $161.2 million, driven by mid-single-digit acquisition growth and low single-digit organic growth[156] - International segment revenues decreased by 10% to $37.1 million, primarily due to unfavorable foreign exchange impacts and a mid-single-digit organic decline[156] - Products and Systems segment revenues fell by 21% to $4.3 million, attributed to lower sales volume and the sale of a subsidiary[156] Operational Efficiency - The company emphasizes the integration of solutions to service customers throughout their assets' lifetimes, enhancing operational efficiency[133] - Income from operations (GAAP) for the three months ended June 30, 2019, increased by $5.1 million, or 50%, to $15.4 million[164] - The company's top ten customers accounted for approximately 39% of total revenues for the three months ended June 30, 2019, up from 35% in the same period of 2018[157] Expenses and Liabilities - The company recorded a charge of $0.5 million for potential withdrawal liability related to multi-employer pension plans during the three and six months ended June 30, 2019[168] - For the six months ended June 30, 2019, income from operations (GAAP) decreased by $5.7 million compared to the same period in 2018, while income before special items (non-GAAP) decreased by $0.2 million, or 1%[169] - Operating expenses (GAAP) as a percentage of revenue increased to 26% for the six months ended June 30, 2019, up from 23% in the same period of 2018[170] - Interest expense for the six months ended June 30, 2019, was approximately $7.1 million, an increase from $3.7 million in 2018, primarily due to borrowings related to an acquisition[171] - The effective income tax rate for the six months ended June 30, 2019, was approximately 45%, compared to 31% for the same period in 2018[172] Cash Flow and Financial Position - Cash provided by operating activities for the six months ended June 30, 2019, was $21.1 million, representing a year-on-year increase of $1.0 million, or 5%[174] - Cash used in investing activities was $11.0 million for the six months ended June 30, 2019, compared to $10.3 million in 2018[175] - Net cash used by financing activities was $23.1 million for the six months ended June 30, 2019, compared to $19.3 million in the same period of 2018[176] - As of June 30, 2019, the company had cash and cash equivalents totaling $12.5 million and available borrowing capacity of $130.2 million under its Credit Agreement[178] - The company was in compliance with the terms of the Credit Agreement as of June 30, 2019[179] - There were no significant changes in contractual obligations and outstanding indebtedness as disclosed in the 2018 Annual Report[180] Market Outlook - The acquisition of Onstream in December 2018 supports corporate initiatives and enhances capabilities in the midstream oil and gas market[141] - The company expects stable oil and gas customer spending for inspection services throughout the remainder of 2019[149] - The asset protection industry is expected to grow due to aging infrastructure and increasing demand for refined petroleum products[142]

Financial Data and Key Metrics Changes - First quarter 2019 revenues decreased by 6% to $176.8 million, but only down 4% on a constant-currency basis, primarily due to a $10 million revenue loss from a contract that was vacated on March 31 last year [23][24] - Gross profit for the quarter was $48.9 million, slightly higher than the previous year despite lower sales volume, with gross margins improving to 27.6% from 25.7%, an increase of 190 basis points [24][30] - Cash flows from operating activities were $8.2 million, a 41% increase compared to $5.8 million in the same quarter last year [28][34] Business Line Data and Key Metrics Changes - Services revenue decreased by 3.6% in the quarter, but was essentially flat when adjusted for the large contract non-renewal, with Onstream contributing an incremental 4% revenue growth to the Services segment [29] - The Services segment generated a gross profit margin of 26.6%, an improvement of 280 basis points compared to the previous year, driven by pruning lower-margin operations and growing higher-margin operations [29] - Products and Systems revenues decreased by $2.7 million, with SG&A as a percentage of revenue at approximately 23.6%, down from 24.4% last quarter but up from 20.8% in the first quarter of 2018 [31] Market Data and Key Metrics Changes - International revenues were down 8.6% from a year ago, primarily due to unfavorable foreign exchange rates, but were down less than 1% in local currencies [30] - International gross margin improved to 29.5%, up 170 basis points from a year ago, attributed to better manpower utilization and improved sales mix [30] Company Strategy and Development Direction - The company is focused on delivering value through innovative performance indicators and maintaining strong customer relationships, which are key differentiators in the market [13][16] - Recent acquisitions, such as West Penn and Onstream, are performing well and are integral to the company's growth strategy, particularly in the aerospace market and pipeline integrity solutions [17][18] - The company is leveraging technology to improve performance and quality while reducing costs, which is expected to facilitate growth and enhance contract wins [20] Management's Comments on Operating Environment and Future Outlook - Management reiterated guidance for full year 2019, expecting total revenues between $765 million to $785 million and adjusted EBITDA between $90 million and $93 million [39] - Despite a challenging first quarter, management remains confident in the underlying business strength and anticipates mid-single-digit growth throughout the year [38][73] - Macro-level economic drivers remain positive, supporting the company's forward momentum [38] Other Important Information - The company recorded two charges totaling $6 million during the first quarter to resolve non-operational matters, which will not affect ongoing operations [25] - Adjusted EBITDA for the first quarter was $12.7 million, primarily impacted by slightly higher selling, general, and administrative expenses [27] Q&A Session Summary Question: Confidence in Revenue Push-Outs - Management indicated that the slower start to the turnaround season was not unexpected and that they feel good about Q2 and the second half of the year [48][51] Question: Segment Margin Updates - Management expects additional margin expansion this year, although not as significant as the previous year, driven by volume recovery [53] Question: Onstream Revenue and Seasonality - Onstream is expected to see sequential growth from Q1, with Q2 and Q3 being the best seasons due to weather and accessibility [61][62] Question: Revenue Guidance and Organic Growth - Management confirmed that the revenue guidance for the remainder of the year is based on organic growth, with no acquisitions factored in [69] Question: Turnaround Business Impact - Management anticipates beating previous year's numbers in Q2, Q3, and Q4, with mid-single-digit growth expected for the full year [73]

[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements for Q1 2019, including balance sheets, income, comprehensive income, equity, cash flows, and detailed notes on business and accounting policies [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202019%20(unaudited)%20and%20December%2031%2C%202018) Total assets increased by $31.4 million to $725.4 million, liabilities by $33.4 million to $456.3 million, and equity decreased by $2.0 million to $269.1 million | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | :--------- | | Total Assets | $725,437 | $694,037 | $31,400 | 4.5% | | Total Liabilities | $456,341 | $422,963 | $33,378 | 7.9% | | Total Equity | $269,096 | $271,074 | $(1,978) | (0.7%) | | Cash and cash equivalents | $24,600 | $25,544 | $(944) | (3.7%) | | Accounts receivable, net | $138,505 | $148,324 | $(9,819) | (6.6%) | | Other assets | $41,204 | $4,767 | $36,437 | 764.5% | | Accrued expenses and other current liabilities | $79,641 | $73,895 | $5,746 | 7.8% | | Other long-term liabilities | $34,427 | $6,482 | $27,945 | 431.1% | [Unaudited Condensed Consolidated Statements of (Loss) Income](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20(Loss)%20Income%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%20March%2031%2C%202018) Q1 2019 saw a net loss of $5.3 million, down from $2.9 million income, with revenue decreasing 6% to $176.8 million and operating loss reaching $4.4 million | Metric | 3 Months Ended March 31, 2019 (in thousands) | 3 Months Ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Revenue | $176,787 | $187,630 | $(10,843) | (5.8%) | | Gross profit | $48,874 | $48,145 | $729 | 1.5% | | Gross profit as a % of Revenue | 27.6% | 25.7% | 1.9 pp | | | (Loss) income from operations | $(4,396) | $6,399 | $(10,795) | (168.7%) | | Net (loss) income | $(5,286) | $2,919 | $(8,205) | (281.1%) | | Basic EPS | $(0.19) | $0.10 | $(0.29) | (290.0%) | | Diluted EPS | $(0.19) | $0.10 | $(0.29) | (290.0%) | [Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%20March%2031%2C%202018) Comprehensive loss for Q1 2019 was $3.2 million, a significant decrease from $4.4 million comprehensive income in Q1 2018, driven by net loss | Metric | 3 Months Ended March 31, 2019 (in thousands) | 3 Months Ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Net (loss) income | $(5,286) | $2,919 | $(8,205) | (281.1%) | | Foreign currency translation adjustments | $2,131 | $1,500 | $631 | 42.1% | | Comprehensive (loss) income | $(3,155) | $4,419 | $(7,574) | (171.4%) | [Unaudited Condensed Consolidated Statements of Equity](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%20March%2031%2C%202018) Total equity decreased slightly to $269.1 million at March 31, 2019, primarily due to a $5.3 million net loss, partially offset by other comprehensive income | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | :--------- | | Total Equity | $269,096 | $271,074 | $(1,978) | (0.7%) | | Net (loss) income | $(5,286) | N/A | N/A | N/A |\ | Other comprehensive income, net of tax | $2,133 | N/A | N/A | N/A |\ | Share-based payments | $1,427 | N/A | N/A | N/A | [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%20March%2031%2C%202018) Net cash from operations increased to $8.2 million, while cash used in investing was $5.0 million and financing used $3.9 million, resulting in a $0.9 million decrease in cash and cash equivalents | Metric | 3 Months Ended March 31, 2019 (in thousands) | 3 Months Ended March 31, 2018 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Net cash provided by operating activities | $8,177 | $5,818 | $2,359 | 40.5% | | Net cash used in investing activities | $(5,001) | $(4,772) | $(229) | 4.8% | | Net cash (used in) provided by financing activities | $(3,949) | $4,261 | $(8,210) | (192.7%) | | Net change in cash and cash equivalents | $(944) | $5,591 | $(6,535) | (116.9%) | | Cash and cash equivalents at end of period | $24,600 | $33,132 | $(8,532) | (25.7%) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures for the financial statements, covering business, accounting policies, revenue, compensation, acquisitions, assets, liabilities, debt, leases, and segment information [1. Description of Business and Basis of Presentation](index=10&type=section&id=1.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Mistras Group provides global asset protection solutions; Q1 2019 financials are unaudited GAAP, with ASC 842 adoption and a 33% effective income tax rate - Mistras Group, Inc. is a leading "one source" global provider of technology-enabled asset protection solutions used to evaluate the structural integrity and reliability of critical energy, industrial, and public infrastructure[24](index=24&type=chunk) - The Company's effective income tax rate was approximately **33%** for the three months ended March 31, 2019, higher than the statutory rate due to discrete items, GILTI, executive compensation provisions from the Tax Act, and foreign tax rates[31](index=31&type=chunk) - The Company adopted ASU No. 2016-02, Leases (Topic 842), on January 1, 2019, resulting in the recording of approximately **$38 million** in right-of-use (ROU) assets and liabilities, with no material impact on statements of (loss) income or cash flows[34](index=34&type=chunk)[36](index=36&type=chunk) [2. Revenue](index=11&type=section&id=2.%20Revenue) Revenue is primarily from services recognized over time; Q1 2019 total revenue decreased 6% to $176.8 million, with Products and Systems down 45%, and Oil & Gas as the largest industry segment - The majority of the Company's revenues are derived from providing services on a time and material basis, recognized over time as work progresses[38](index=38&type=chunk)[43](index=43&type=chunk) | Segment | Q1 2019 Revenue (in thousands) | Q1 2018 Revenue (in thousands) | Change (in thousands) | % Change | | :------------------- | :----------------------------- | :----------------------------- | :-------------------- | :--------- | | Services | $140,298 | $145,595 | $(5,297) | (3.6%) | | International | $35,162 | $38,456 | $(3,294) | (8.6%) | | Products and Systems | $3,432 | $6,184 | $(2,752) | (44.5%) | | Total | $176,787 | $187,630 | $(10,843) | (5.8%) | | Industry | Q1 2019 Revenue (in thousands) | Q1 2018 Revenue (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Oil & Gas | $101,385 | $111,961 | | Aerospace & Defense | $24,755 | $27,589 | | Industrials | $21,630 | $18,657 | [3. Share-Based Compensation](index=14&type=section&id=3.%20Share-Based%20Compensation) Share-based compensation expense for restricted stock units was $0.9 million in Q1 2019, with $10.0 million unrecognized costs over 2.9 years - Share-based compensation expense for restricted stock unit awards was **$0.9 million** for Q1 2019, compared to **$0.8 million** for Q1 2018[58](index=58&type=chunk) - As of March 31, 2019, there was **$10.0 million** of unrecognized compensation costs related to restricted stock unit awards, expected to be recognized over a remaining weighted average period of **2.9 years**[58](index=58&type=chunk) - Aggregate share-based compensation expense related to Performance Restricted Stock Units (PRSUs) was approximately **$0.2 million** for Q1 2019, compared to **$0.1 million** for Q1 2018[67](index=67&type=chunk) [4. Earnings per Share](index=16&type=section&id=4.%20Earnings%20per%20Share) Basic and diluted EPS for Q1 2019 were both $(0.19), a decrease from $0.10 in Q1 2018, reflecting the net loss | Metric | 3 Months Ended March 31, 2019 | 3 Months Ended March 31, 2018 | | :--------------------------------- | :---------------------------- | :---------------------------- | | Net (loss) income attributable to Mistras Group, Inc. | $(5,293) (in thousands) | $2,907 (in thousands) | | Basic EPS | $(0.19) | $0.10 | | Diluted EPS | $(0.19) | $0.10 | | Weighted average common shares outstanding (Basic) | 28,574 (in thousands) | 28,304 (in thousands) | | Weighted average common shares outstanding (Diluted) | 28,574 (in thousands) | 29,362 (in thousands) | [5. Acquisitions](index=18&type=section&id=5.%20Acquisitions) No acquisitions occurred in Q1 2019 or Q1 2018; acquisition-related expenses, net, were $0.5 million in Q1 2019 due to contingent consideration adjustments - The Company did not complete any acquisitions during the three months ended March 31, 2019, or March 31, 2018[76](index=76&type=chunk) | Metric | 3 Months Ended March 31, 2019 (in thousands) | 3 Months Ended March 31, 2018 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Acquisition-related expense (benefit), net | $453 | $(994) | [6. Accounts Receivable, net](index=18&type=section&id=6.%20Accounts%20Receivable%2C%20net) Net accounts receivable decreased to $138.5 million at March 31, 2019, with a $5.7 million charge for a troubled customer increasing the allowance for doubtful accounts | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :-------------------------- | :---------------------------- | :------------------------------- | | Trade accounts receivable | $148,070 | $152,511 | | Allowance for doubtful accounts | $(9,565) | $(4,187) | | Accounts receivable, net | $138,505 | $148,324 | - During Q1 2019, the Company recorded an additional charge of **$5.7 million** to fully reserve for a troubled renewable energy customer, partially offset by a net **$0.2 million** recovery of an unrelated bad debt provision[80](index=80&type=chunk)[82](index=82&type=chunk) [7. Property, Plant and Equipment, net](index=19&type=section&id=7.%20Property%2C%20Plant%20and%20Equipment%2C%20net) Net property, plant, and equipment remained stable at $93.9 million at March 31, 2019, with depreciation expense of approximately $6.1 million for Q1 2019 | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--------------------------------- | :---------------------------- | :------------------------------- | | Property, plant and equipment, net | $93,916 | $93,895 | - Depreciation expense for both the three months ended March 31, 2019, and March 31, 2018, was approximately **$6.1 million**[83](index=83&type=chunk) [8. Goodwill](index=19&type=section&id=8.%20Goodwill) Goodwill increased slightly to $280.7 million at March 31, 2019, due to foreign currency translation adjustments, with no impairment indicators found | Segment | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :------------------- | :---------------------------- | :------------------------------- | | Services | $245,496 | $243,476 | | International | $35,200 | $35,783 | | Total | $280,696 | $279,259 | - As of March 31, 2019, the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable[84](index=84&type=chunk) [9. Intangible Assets](index=20&type=section&id=9.%20Intangible%20Assets) Net intangible assets decreased to $109.1 million at March 31, 2019, with amortization expense for Q1 2019 increasing to $3.6 million | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :------------------- | :---------------------------- | :------------------------------- | | Intangible assets, net | $109,055 | $111,395 | - Amortization expense for the three months ended March 31, 2019, was approximately **$3.6 million**, compared to **$2.5 million** for the three months ended March 31, 2018[89](index=89&type=chunk) [10. Accrued Expenses and Other Current Liabilities](index=20&type=section&id=10.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses and other current liabilities increased to $79.6 million at March 31, 2019, including an $8.7 million right-of-use liability from ASC 842 adoption | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Accrued expenses and other current liabilities | $79,641 | $73,895 | | Right-of-use liability - operating | $8,700 | — | [11. Long-Term Debt](index=20&type=section&id=11.%20Long-Term%20Debt) Total debt decreased to $287.7 million at March 31, 2019; the Company obtained a waiver for non-compliance with its Funded Debt Leverage Ratio covenant | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--------------------------------- | :---------------------------- | :------------------------------- | | Total debt | $287,706 | $290,620 | | Long-term debt, net of current portion | $280,919 | $283,787 | - The Company's Credit Agreement provides a **$300 million** revolving line of credit and a **$100 million** senior secured term loan A facility, both maturing on December 12, 2023[92](index=92&type=chunk)[94](index=94&type=chunk) - As of March 31, 2019, the Company was not in compliance with its Funded Debt Leverage Ratio covenant but obtained a waiver for such non-compliance[99](index=99&type=chunk) [12. Fair Value Measurements](index=22&type=section&id=12.%20Fair%20Value%20Measurements) Contingent consideration liabilities are measured at fair value (Level 3) using discounted cash flow, increasing to $2.7 million at March 31, 2019 - The fair value of contingent consideration liabilities is estimated using a discounted cash flow technique, representing a Level 3 fair value measurement[103](index=103&type=chunk) | Metric | 3 Months Ended March 31, 2019 (in thousands) | 3 Months Ended March 31, 2018 (in thousands) | | :--------------- | :--------------------------------------- | :--------------------------------------- | | Beginning balance | $2,365 | $5,508 | | Ending balance | $2,699 | $2,909 | [13. Leases](index=23&type=section&id=13.%20Leases) ASC 842 adoption led to $36.3 million ROU assets and $37.0 million lease liabilities; total Q1 2019 lease costs were $4.9 million | Metric | As of March 31, 2019 (in thousands) | | :--------------------------------- | :---------------------------------- | | Right-of-use assets (Operating) | $36,289 | | Right-of-use liability - current | $8,700 | | Right-of-use liability - long term | $28,340 | | Total right-of-use liabilities | $37,040 | | Lease Cost Component | 3 Months Ended March 31, 2019 (in thousands) | | :--------------------------------------- | :--------------------------------------- | | Finance lease expense (Amortization of ROU assets) | $1,292 | | Finance lease expense (Interest on lease liabilities) | $197 | | Operating lease expense | $3,023 | | Short-term lease expense | $133 | | Variable lease expense | $272 | | Total | $4,917 | | Metric | March 31, 2019 | | :--------------------------------------- | :------------- | | Weighted average remaining lease term (Operating leases) | 6.0 years | | Weighted average discount rate (Operating leases) | 5.97% | [14. Commitments and Contingencies](index=25&type=section&id=14.%20Commitments%20and%20Contingencies) The Company faces legal proceedings, recorded a $0.5 million pension withdrawal liability (totaling $4.9 million), and has $1.6 million in German Labor Lease Act severance obligations - The Company recorded a charge of **$0.5 million** during Q1 2019 for a potential multi-employer pension plan withdrawal liability, bringing the estimated total balance to approximately **$4.9 million** as of March 31, 2019[120](index=120&type=chunk) - The Company estimated approximately **$1.6 million** in severance payment obligations as of March 31, 2019, due to the German Labor Lease Act limiting temporary workers' duration[122](index=122&type=chunk) - Total potential acquisition-related contingent consideration ranged from zero to approximately **$5.8 million** as of March 31, 2019[123](index=123&type=chunk) [15. Segment Disclosure](index=26&type=section&id=15.%20Segment%20Disclosure) The Company's three segments (Services, International, Products and Systems) saw Q1 2019 revenue declines of 3.6%, 8.6%, and 44.5% respectively, with Services operating income significantly declining | Segment | Q1 2019 Revenue (in thousands) | Q1 2018 Revenue (in thousands) | % Change | | :------------------- | :----------------------------- | :----------------------------- | :--------- | | Services | $140,298 | $145,595 | (3.6%) | | International | $35,162 | $38,456 | (8.6%) | | Products and Systems | $3,432 | $6,184 | (44.5%) | | Segment | Q1 2019 Gross Profit (in thousands) | Q1 2018 Gross Profit (in thousands) | % Change | | :------------------- | :---------------------------------- | :---------------------------------- | :--------- | | Services | $37,365 | $34,710 | 7.6% | | International | $10,360 | $10,707 | (3.2%) | | Products and Systems | $1,239 | $2,890 | (57.1%) | | Segment | Q1 2019 Income (Loss) from Operations (in thousands) | Q1 2018 Income (Loss) from Operations (in thousands) | | :------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Services | $4,053 | $12,275 | | International | $(215) | $920 | | Products and Systems | $(1,328) | $273 | [16. Repurchase of Common Stock](index=29&type=section&id=16.%20Repurchase%20of%20Common%20Stock) The $50 million stock repurchase plan was terminated on April 1, 2019; no common stock was repurchased in Q1 2019, except for tax withholding shares - The Company's Board of Directors approved the termination of its **$50 million** stock repurchase plan on April 1, 2019, with **$25.1 million** remaining[132](index=132&type=chunk)[199](index=199&type=chunk) - No common stock was repurchased under the plan during the three months ended March 31, 2019, other than **20,440 shares** acquired from employees to satisfy tax withholding obligations[132](index=132&type=chunk)[199](index=199&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the Company's financial condition and results for Q1 2019, covering business overview, market dynamics, operations, liquidity, and critical accounting policies [Forward-Looking Statements](index=29&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements that express plans, anticipation, intent, contingency, goals, targets or future development, which are not statements of historical fact[134](index=134&type=chunk) - These statements are subject to known and unknown risks and uncertainties that could cause actual results and developments to differ materially[134](index=134&type=chunk)[135](index=135&type=chunk) [Overview](index=29&type=section&id=Overview) Mistras Group provides global asset protection solutions, leveraging technology and acquisitions like Onstream, driven by market dynamics such as aging infrastructure and stringent safety regulations - Mistras Group offers "OneSource for Asset Protection Solutions" globally, evaluating the safety, structural integrity, and reliability of critical energy, industrial, and public infrastructure, and commercial aerospace components[136](index=136&type=chunk) - Key market dynamics include extending the useful life of aging infrastructure, outsourcing of non-core activities, increasing corrosion from low-quality inputs, increasing use of advanced materials, meeting safety regulations, and an expanding aerospace industry[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - The Onstream acquisition (December 2018) strengthens the Company's presence in the midstream oil and gas market and provides the Streamview™ software, an advanced digital solution[148](index=148&type=chunk) [Note About Non-GAAP Measures](index=32&type=section&id=Note%20About%20Non-GAAP%20Measures) The Company uses "Income (loss) before special items" as a non-GAAP measure to evaluate core business performance, excluding acquisition expenses, impairment, and reorganization costs - The non-GAAP financial performance measure "Income (loss) before special items" is used to evaluate performance, excluding transaction expenses, contingent consideration adjustments, impairment charges, reorganization costs, and other special items[157](index=157&type=chunk) - This non-GAAP measure provides additional tools to compare core business operating performance on a consistent basis and measure underlying trends[158](index=158&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q1 2019 revenue decreased 6% to $176.8 million, leading to a GAAP operating loss of $4.4 million and a 58% decrease in non-GAAP income before special items, impacted by bad debt and pension expenses | Metric | Q1 2019 (in thousands) | Q1 2018 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------- | :--------------------- | :--------- | | Revenues | $176,787 | $187,630 | (5.8%) | | Gross profit | $48,874 | $48,145 | 1.5% | | Gross profit as a % of Revenue | 27.6% | 25.7% | 1.9 pp | | (Loss) income from operations (GAAP) | $(4,396) | $6,399 | (168.7%) | | Income before special items (non-GAAP) | $2,298 | $5,494 | (58.2%) | | Interest expense | $3,527 | $1,792 | 96.8% | | Net (loss) income | $(5,286) | $2,919 | (281.1%) | - Total revenues decreased **6%** in Q1 2019 due to a mid-single digit organic decline (including a **$10 million** reduction from a contract ending after Q1 2018) and a low-single digit unfavorable foreign exchange impact[161](index=161&type=chunk)[163](index=163&type=chunk) - Operating expenses (GAAP) increased to **30%** of revenue in Q1 2019 (from **22%** in Q1 2018), driven by special items including a **$5.7 million** bad debt provision for a troubled customer and a **$0.5 million** pension withdrawal expense, plus **$3.2 million** in Onstream acquisition operating expenses[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash from operations increased 41% to $8.2 million; the Company ended Q1 2019 with $24.6 million cash and $114.1 million borrowing capacity, having obtained a waiver for a debt covenant non-compliance | Cash Flow Activity | Q1 2019 (in thousands) | Q1 2018 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | | Net cash provided by operating activities | $8,177 | $5,818 | $2,359 | 40.5% | | Net cash used in investing activities | $(5,001) | $(4,772) | $(229) | 4.8% | | Net cash (used in) provided by financing activities | $(3,949) | $4,261 | $(8,210) | (192.7%) | - As of March 31, 2019, the Company had **$24.6 million** in cash and cash equivalents and **$114.1 million** in available borrowing capacity under its Credit Agreement[183](index=183&type=chunk) - The Company was not in compliance with its Funded Debt Leverage Ratio covenant as of March 31, 2019, but obtained a waiver for this non-compliance[184](index=184&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no significant changes to the Company's critical accounting policies and estimates since the 2018 Annual Report - There have been no significant changes to the Company's critical accounting policies and estimates from the information provided in the 2018 Annual Report[187](index=187&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There have been no significant changes to the Company's quantitative and qualitative disclosures about market risk from the information provided in the 2018 Annual Report - There have been no significant changes to the Company's quantitative and qualitative disclosures about market risk as discussed in the 2018 Annual Report[189](index=189&type=chunk) [ITEM 4. Controls and Procedures](index=38&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2019[190](index=190&type=chunk) - There has been no change in the Company's internal control over financial reporting that materially affected, or is reasonably likely to materially affect, such internal control during the quarter ended March 31, 2019[191](index=191&type=chunk) [PART II—OTHER INFORMATION](index=39&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=39&type=section&id=ITEM%201.%20Legal%20Proceedings) Legal proceedings are described in Note 14, with no material developments beyond prior disclosures in Note 14 and the 2018 Annual Report - Legal proceedings are described in Note 14 to the condensed consolidated financial statements[194](index=194&type=chunk) - There have been no material developments with regard to any matters disclosed in the 2018 Annual Report, except as disclosed in Note 14[194](index=194&type=chunk) [ITEM 1.A. Risk Factors](index=39&type=section&id=ITEM%201.A.%20Risk%20Factors) No material changes to risk factors, except for non-compliance with the Funded Debt Leverage Ratio covenant as of March 31, 2019, for which a waiver was obtained - The Company failed to maintain a Funded Debt Leverage Ratio of **4.00 to 1.00** for the twelve months ended March 31, 2019, as required by the Credit Agreement[195](index=195&type=chunk) - A waiver was obtained for the non-compliance with the Funded Debt Leverage Ratio covenant[195](index=195&type=chunk) - There can be no assurance that the Company will be in compliance with this covenant at the end of the next quarter, and if necessary, similarly obtain a waiver of any such noncompliance[195](index=195&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales or public offering proceeds were reported; the stock repurchase plan was terminated, and no shares were purchased in Q1 2019, except for tax withholding - No unregistered sales of equity securities or use of proceeds from public offerings occurred during the quarter[196](index=196&type=chunk)[197](index=197&type=chunk) - The Company's share repurchase plan was terminated on April 1, 2019, with **$25.1 million** remaining[199](index=199&type=chunk) - During Q1 2019, **20,440 shares** were acquired as a result of employees surrendering shares to satisfy tax withholding obligations in connection with the vesting of restricted stock units[199](index=199&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=39&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[200](index=200&type=chunk) [ITEM 4. Mine Safety Disclosures](index=39&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[202](index=202&type=chunk) [ITEM 5. Other Information](index=40&type=section&id=ITEM%205.%20Other%20Information) The Company reported no other information for the period - No other information was reported[203](index=203&type=chunk) [ITEM 6. Exhibits](index=41&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and XBRL-related documents - Exhibits include certifications from the Chief Executive Officer (31.1) and Chief Financial Officer (31.2), a certification pursuant to Section 906 of the Sarbanes-Oxley Act (32.1), and various XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF)[204](index=204&type=chunk) [SIGNATURES](index=42&type=section&id=SIGNATURES) The report was duly signed on behalf of Mistras Group, Inc. by Edward J. Prajzner, Senior Vice President, Chief Financial Officer, and Treasurer, on May 7, 2019 - The report was signed by Edward J. Prajzner, Senior Vice President, Chief Financial Officer and Treasurer, on May 7, 2019[207](index=207&type=chunk)

Part I [Business Overview](index=3&type=section&id=ITEM%201.%20BUSINESS) Mistras Group provides global technology-enabled asset protection solutions for critical infrastructure, offering a "OneSource" portfolio of inspections, consulting, maintenance, and monitoring, driven by aging infrastructure and regulatory demands - Mistras Group provides **'OneSource for Asset Protection Solutions®'** globally, focusing on safety, structural integrity, and reliability of critical infrastructure[14](index=14&type=chunk)[15](index=15&type=chunk) - The company's specialized solutions include Field Inspections, Consulting, Maintenance, Data Management (**PCMS®**), Access, Monitoring, Laboratory Quality Assurance/Control (**QA/QC**), and Equipment[16](index=16&type=chunk)[20](index=20&type=chunk)[24](index=24&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[37](index=37&type=chunk)[40](index=40&type=chunk) Revenue and Net Income Trends (2016-2018) | Metric | Year Ended Dec 31, 2018 | Year Ended Dec 31, 2017 | Transition Period Ended Dec 31, 2016 | | :--------------------- | :---------------------- | :---------------------- | :----------------------------------- | | Revenues | $742.4 million | $701.0 million | $404.2 million | | Net Income (Loss) | $6.8 million | $(2.2) million | $9.6 million | | Services Segment Revenue | 77% | 78% | 73% | | Top 10 Customers Revenue | 34% | 38% | 37% | - Key industry dynamics driving growth include extending the useful life of aging infrastructure, outsourcing non-core activities, increasing corrosion, use of advanced materials, meeting safety regulations, expanding end-markets, and **aerospace industry growth**[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - The company's growth strategy focuses on expanding in **Aerospace and Pipeline Integrity**, enhancing mechanical services, developing technology-enabled solutions, expanding offerings, entering new end markets, and disciplined acquisitions[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) Revenue by Target Market (Year ended December 31, 2018) | Target Market | Percentage of Consolidated Revenues | | :-------------------------------- | :---------------------------------- | | Oil & Gas | 56% | | Aerospace & Defense | 15% | | Industrials | 12% | | Power Generation & Transmission | 6% | | Other Process Industries | 5% | | Infrastructure, Research & Engineering | 3% | | Other | 3% | - R&D expenses were approximately **$3.3 million in 2018**, up from **$2.3 million in 2017**, focusing on integrating technologies, enhancing efficiencies, and developing platforms like **MISTRAS Digital**[107](index=107&type=chunk)[108](index=108&type=chunk) [Risk Factors](index=17&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces risks from acquisitions, international operations, oil and gas industry dependency, growth management, customer reliance, IT security, personnel, competition, pension liabilities, and regulatory compliance - Acquisition strategy carries risks including integration difficulties, unanticipated operational/financial risks, potential dilution, increased indebtedness, and **goodwill impairment**[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - International operations (**34% of 2018 revenues**) are subject to currency fluctuations, geopolitical risks, foreign regulations, **Brexit impacts**, and restrictions on fund repatriation[131](index=131&type=chunk)[133](index=133&type=chunk) - Dependency on the **oil and gas industry (56% of 2018 revenues)** makes the company susceptible to negative trends, economic slowdowns, or low oil prices, impacting revenues, profits, and cash flows[132](index=132&type=chunk) - Risks related to common stock include price fluctuations, significant control by a major stockholder (**Dr. Sotirios J. Vahaviolos owns ~35%**), no plans for future dividends, and potential dilution from future stock sales[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Unresolved Staff Comments](index=25&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments from the SEC [Properties](index=25&type=section&id=ITEM%202.%20PROPERTIES) As of December 31, 2018, Mistras Group operated approximately 125 offices in 10 countries, with its Princeton Junction, New Jersey headquarters serving as the primary manufacturing and R&D location - As of December 31, 2018, the company operated approximately **125 offices in 10 countries**[169](index=169&type=chunk) - Corporate headquarters in Princeton Junction, New Jersey, is the primary location for manufacturing and R&D[169](index=169&type=chunk) - The Services segment utilizes approximately **85 offices in North America**, while the International segment has about **40 offices** across Europe, the Middle East, Africa, Asia, and South America[169](index=169&type=chunk) [Legal Proceedings](index=25&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is subject to periodic legal proceedings, including an EPA investigation regarding hazardous materials at a California facility and a vehicle accident lawsuit, with insurance coverage believed to be sufficient - The company is subject to periodic lawsuits, investigations, and claims in the ordinary course of business[170](index=170&type=chunk)[449](index=449&type=chunk) - An **EPA investigation** is ongoing at a leased facility in Cudahy, California, concerning hazardous materials in groundwater, with liability currently undetermined[115](index=115&type=chunk)[453](index=453&type=chunk)[454](index=454&type=chunk) - A lawsuit has been filed regarding a company vehicle accident causing injuries and property damage; the company believes its insurance is sufficient to cover claims[452](index=452&type=chunk) [Mine Safety Disclosure](index=26&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURE) There are no mine safety disclosures to report Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Mistras Group's common stock trades on the NYSE under 'MG', with 8 record holders as of March 12, 2019; the company does not pay dividends and has $25.1 million remaining under its share repurchase plan - Common stock trades on the **New York Stock Exchange (NYSE)** under the ticker symbol **'MG'**[173](index=173&type=chunk) - As of March 12, 2019, there were **8 holders of record** of the Common Stock[173](index=173&type=chunk) - The company has not declared or paid any cash dividends and does not anticipate doing so, intending to retain future earnings for business expansion[164](index=164&type=chunk)[174](index=174&type=chunk) Shares Repurchased in Q4 2018 | Month Ending | Total Number of Shares Purchased | Average Price Paid per Share | | :--------------- | :------------------------------- | :--------------------------- | | October 31, 2018 | 33,585 | $19.59 | | November 30, 2018| 5,067 | $16.92 | | December 31, 2018| 2,730 | $14.38 | - Approximately **$25.1 million** remained available under the **$50.0 million share repurchase plan** as of December 31, 2018[176](index=176&type=chunk)[467](index=467&type=chunk) [Selected Financial Data](index=27&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section summarizes Mistras Group's selected financial data from 2014 to 2018, including key figures from the income statement, balance sheet, and cash flow statements Selected Financial Data (2014-2018) | Metric (in thousands, except per share) | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 (Transition Period) | May 31, 2016 | May 31, 2015 | May 31, 2014 | | :-------------------------------------- | :----------- | :----------- | :------------------------------- | :----------- | :----------- | :----------- | | Revenues | $742,354 | $700,970 | $404,161 | $719,181 | $711,252 | $623,447 | | Net income (loss) attributable to Mistras Group, Inc. | $6,836 | $(2,175) | $9,568 | $24,654 | $16,081 | $22,518 | | Diluted EPS | $0.23 | $(0.08) | $0.32 | $0.82 | $0.54 | $0.77 | | Total Assets | $694,037 | $554,441 | $469,427 | $482,675 | $471,727 | $443,972 | | Total Long-Term Debt | $303,617 | $181,491 | $103,466 | $104,776 | $132,822 | $97,563 | | Net cash provided by operating activities | $41,664 | $55,799 | $30,259 | $68,124 | $49,840 | $36,873 | | Net cash used in investing activities | $(155,450) | $(102,797) | $(17,374) | $(16,752) | $(49,651) | $(38,005) | | Net cash (used in) provided by financing activities | $113,969 | $53,045 | $(12,869) | $(40,378) | $2,066 | $3,262 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes Mistras Group's financial condition and operating results for 2016-2018, covering segment performance, liquidity, capital resources, critical accounting policies, and recent accounting pronouncements - Mistras Group is a leading global provider of technology-enabled asset protection solutions, offering a comprehensive portfolio from routine inspections to complex asset integrity management[185](index=185&type=chunk) - The company's operations are divided into three reportable segments: **Services (North America)**, **International (Europe, Middle East, Africa, Asia, South America)**, and **Products and Systems (primarily US)**[186](index=186&type=chunk)[188](index=188&type=chunk)[459](index=459&type=chunk)[460](index=460&type=chunk) - Market conditions strengthened in **H2 2017** and improved throughout **2018**, with **oil and gas customer spending rebounding** and strong demand in the aerospace industry[192](index=192&type=chunk) [Year ended December 31, 2018 vs. Year ended December 31, 2017](index=32&type=section&id=7.3.1%20Year%20ended%20December%2031,%202018%20vs.%20Year%20ended%20December%2031,%202017) In 2018, revenues increased by **6% to $742.4 million**, gross profit rose by **11% to $207.9 million** with improved margins, and GAAP income from operations surged by **434% to $22.2 million**, while interest expense increased and the effective tax rate was **52.0%** Consolidated Financial Performance (2018 vs. 2017) | Metric (in thousands) | 2018 | 2017 | Change ($) | Change (%) | | :-------------------- | :---------- | :---------- | :---------- | :--------- | | Revenues | $742,354 | $700,970 | $41,384 | 6% | | Gross profit | $207,874 | $187,712 | $20,162 | 11% | | Gross profit as % of Revenue | 28% | 27% | 1% | | | Income from operations (GAAP) | $22,221 | $4,160 | $18,061 | 434% | | Net income (loss) attributable to Mistras Group, Inc. | $6,836 | $(2,175) | $9,011 | -414% | | Interest expense | $7,950 | $4,386 | $3,564 | 81% | | Effective income tax rate | 52.0% | (857.9)% | | | Segment Revenue Growth (2018 vs. 2017) | Segment | 2018 Revenue (in thousands) | 2017 Revenue (in thousands) | Change ($) | Change (%) | | :------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Services | $574,619 | $543,565 | $31,054 | 6% | | International | $153,448 | $144,265 | $9,183 | 6% | | Products and Systems | $23,426 | $23,297 | $129 | 1% | - Gross profit margins improved across all segments in 2018: **Services (26.4% from 25.6%)**, **International (29.6% from 27.0%)**, and **Products and Systems (45.1% from 42.1%)**, primarily due to improved sales mix and higher utilization[201](index=201&type=chunk) - Special items in 2018 included a **$5.9 million pension withdrawal expense**, **$1.2 million in labor claims** for the Brazilian subsidiary, and a **$1.6 million accrual for severance** related to the German Labor Lease Act[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) [Year ended December 31, 2017 vs. Year ended December 31, 2016](index=36&type=section&id=7.3.2%20Year%20ended%20December%2031,%202017%20vs.%20Year%20ended%20December%2031,%202016) In 2017, revenues increased by **2% to $701.0 million**, primarily from Services, while gross profit declined by **3% to $187.7 million** with decreased margins, and GAAP income from operations decreased by **84% to $4.2 million**, with a highly negative effective tax rate Consolidated Financial Performance (2017 vs. 2016) | Metric (in thousands) | 2017 | 2016 (unaudited) | Change ($) | Change (%) | | :-------------------- | :---------- | :--------------- | :---------- | :--------- | | Revenues | $700,970 | $684,762 | $16,208 | 2% | | Gross profit | $187,712 | $194,134 | $(6,422) | -3% | | Gross profit as % of Revenue | 26.8% | 28.4% | -1.6% | | | Income from operations (GAAP) | $4,160 | $25,546 | $(21,386) | -84% | | Net (loss) income attributable to Mistras Group, Inc. | $(2,175) | $14,409 | $(16,584) | -115% | | Interest expense | $4,386 | $3,075 | $1,311 | 43% | | Effective income tax rate | (858)% | 36% | | | Segment Revenue Growth (2017 vs. 2016) | Segment | 2017 Revenue (in thousands) | 2016 Revenue (in thousands) | Change ($) | Change (%) | | :------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Services | $543,565 | $519,378 | $24,187 | 5% | | International | $144,265 | $148,761 | $(4,496) | -3% | | Products and Systems | $23,297 | $26,049 | $(2,752) | -11% | - International segment gross margins declined by **550 basis points to 27.0%** in 2017 due to lower revenues, poor contract margins, and lower technical labor utilization; Products and Systems gross margins also declined by **380 basis points to 42.1%** due to lower sales volumes and less favorable sales mix[218](index=218&type=chunk) - Total operating expenses increased by **$15.0 million, or 9%**, primarily due to a **$15.8 million impairment charge** for the Products and Systems segment[220](index=220&type=chunk) [Transition period ended December 31, 2016 vs. Transition period ended December 31, 2015](index=39&type=section&id=7.3.3%20Transition%20period%20ended%20December%2031,%202016%20vs.%20Transition%20period%20ended%20December%2031,%202015) For the seven-month transition period ended December 31, 2016, revenues decreased by **6% to $404.2 million**, gross profit decreased by **5% to $117.0 million**, and GAAP income from operations decreased by **50% to $17.5 million**, with a **38%** effective tax rate Consolidated Financial Performance (Transition Period 2016 vs. 2015) | Metric (in thousands) | Dec 31, 2016 (Transition Period) | Dec 31, 2015 (Unaudited Transition Period) | Change ($) | Change (%) | | :-------------------- | :------------------------------- | :----------------------------------------- | :---------- | :--------- | | Revenues | $404,161 | $427,913 | $(23,752) | -6% |\n| Gross profit | $117,004 | $123,190 | $(6,186) | -5% | | Gross profit as % of Revenue | 28.9% | 28.8% | 0.1% | | | Income from operations (GAAP) | $17,533 | $35,098 | $(17,565) | -50% | | Net income attributable to Mistras Group, Inc. | $9,568 | $19,814 | $(10,246) | -52% | | Interest expense | $2,052 | $3,672 | $(1,620) | -44% | | Effective income tax rate | 38% | 37% | 1% | | Segment Revenue Growth (Transition Period 2016 vs. 2015) | Segment | Dec 31, 2016 Revenue (in thousands) | Dec 31, 2015 Revenue (in thousands) | Change ($) | Change (%) | | :------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Services | $293,218 | $327,118 | $(33,900) | -10% | | International | $104,013 | $87,411 | $16,602 | 19% | | Products and Systems | $14,541 | $18,786 | $(4,245) | -23% | - International gross profit margins improved to **32.9% from 30.6%** due to organic growth and improved utilization, while Services segment gross profit margins decreased to **25.8% from 26.8%** due to lower sales volume and less favorable sales mix[231](index=231&type=chunk) [Liquidity and Capital Resources Overview](index=44&type=section&id=7.4.1%20Liquidity%20and%20Capital%20Resources%20Overview) Mistras Group funds operations through cash, borrowings, and capital leases, generating **$41.7 million** in operating cash flow in 2018, with capital expenditures of **$21.1 million** - The company funds operations from cash provided by operations, bank borrowings, and capital lease financings[237](index=237&type=chunk) Operating Cash Flow and Capital Expenditures (2016-2018) | Metric (in millions) | Year Ended Dec 31, 2018 | Year Ended Dec 31, 2017 | Year Ended Dec 31, 2016 | | :------------------- | :---------------------- | :---------------------- | :---------------------- | | Operating Cash Flow | $41.7 | $55.8 | $63.2 | | Capital Expenditures | $21.1 | $20.6 | $15.9 | - Cash provided by operating activities declined by **$14 million** in 2018 from the prior year, primarily due to working capital movements and timing of accounts receivable collections[239](index=239&type=chunk) [Cash Flows Table](index=44&type=section&id=7.4.2%20Cash%20Flows%20Table) This table summarizes Mistras Group's cash flows from operating, investing, and financing activities for 2016-2018, showing a net decrease in cash and cash equivalents of **$2.0 million** in 2018 Consolidated Cash Flows (2016-2018) | Cash Flow Activity (in thousands) | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 (Unaudited) | Dec 31, 2016 (Transition Period) | May 31, 2016 | | :-------------------------------- | :----------- | :----------- | :----------------------- | :------------------------------- | :----------- | | Operating activities | $41,664 | $55,799 | $63,211 | $30,259 | $68,124 | | Investing activities | $(155,450) | $(102,797) | $(22,408) | $(17,374) | $(16,752) | | Financing activities | $113,969 | $53,045 | $(30,031) | $(12,869) | $(40,378) | | Effect of exchange rate changes | $(2,180) | $2,340 | $(1,217) | $(2,050) | $(361) | | Net change in cash and cash equivalents | $(1,997) | $8,387 | $9,555 | $(2,034) | $10,633 | [Cash Flows from Operating Activities](index=44&type=section&id=7.4.3%20Cash%20Flows%20from%20Operating%20Activities) Cash provided by operating activities decreased to **$41.7 million** in 2018 from **$55.8 million** in 2017 due to working capital movements, and the 2017 decrease from 2016 was due to lower net income - Cash provided by operating activities was **$41.7 million** in 2018, a **$14 million decline** from 2017, primarily due to working capital movements and timing of accounts receivable collections[239](index=239&type=chunk) - Cash provided by operating activities in 2017 was **$55.8 million**, an **$8 million decline** from 2016, mainly due to lower net income, exclusive of a **$15.8 million impairment charge**[240](index=240&type=chunk) [Cash Flows from Investing Activities](index=45&type=section&id=7.4.4%20Cash%20Flows%20from%20Investing%20Activities) Net cash used in investing activities significantly increased to **$155.5 million** in 2018, primarily driven by **$135.7 million** in acquisitions and **$21.1 million** in capital expenditures, following **$102.8 million** used in 2017 - Net cash used in investing activities was **$155.5 million** in 2018, primarily due to **$135.7 million for acquisitions** (net of dispositions) and **$21.1 million for property, plant, and equipment and intangible assets**[242](index=242&type=chunk) - Net cash used in investing activities was **$102.8 million** in 2017, primarily due to **$83.4 million for acquisitions** and **$20.6 million for property, plant, and equipment and intangible assets**[243](index=243&type=chunk) [Cash Flows from Financing Activities](index=45&type=section&id=7.4.5%20Cash%20Flows%20from%20Financing%20Activities) Net cash provided by financing activities was **$114.0 million** in 2018, mainly from **$125.2 million** in net borrowings for acquisitions, and **$53.0 million** in 2017, primarily from **$71.5 million** in net borrowings - Net cash provided by financing activities was **$114.0 million** in 2018, primarily from **$125.2 million in net borrowings** to fund acquisitions, offset by **$6.2 million in other debt/capital lease repayments** and **$2.3 million in contingent consideration payments**[245](index=245&type=chunk) - Net cash provided by financing activities was **$53.0 million** in 2017, primarily from **$71.5 million in net borrowings** for acquisitions, offset by **$15.9 million in treasury stock purchases**[246](index=246&type=chunk) [Cash Balance and Credit Facility Borrowings](index=45&type=section&id=7.4.6%20Cash%20Balance%20and%20Credit%20Facility%20Borrowings) As of December 31, 2018, the company had **$25.5 million** in cash, **$112.9 million** available borrowing capacity, and **$281.7 million** outstanding under its credit agreement, which was amended in December 2018 to increase the revolving line of credit to **$300 million** and add a **$100 million** term loan A facility, with all covenants in compliance Cash and Borrowing Capacity (as of Dec 31, 2018) | Metric | Amount (in millions) | | :----------------------------------- | :------------------- | | Cash and cash equivalents | $25.5 | | Available borrowing capacity | $112.9 | | Borrowings outstanding under credit agreement | $281.7 | | Letters of credit outstanding | $5.4 | - The Fifth Amended and Restated Credit Agreement (Dec 2018) increased the revolving line of credit to **$300 million** and added a **$100 million senior secured term loan A facility**, both maturing **Dec 2023**[250](index=250&type=chunk) - The company was in compliance with all financial covenants of the Credit Agreement as of December 31, 2018[255](index=255&type=chunk) [Liquidity and Capital Resources Outlook](index=46&type=section&id=7.4.7%20Liquidity%20and%20Capital%20Resources%20Outlook) Future cash sources are expected to include operating activities and borrowings, primarily for acquisitions, international expansion, stock repurchases, and technology investments, with capital expenditures historically **2% to 3% of revenues** - Future cash sources include cash flow from operating activities and borrowings under the Credit Agreement[256](index=256&type=chunk) - Future uses of cash are primarily for acquisitions, international expansion, stock repurchases, field testing equipment, technology/software investments, and asset replacement[257](index=257&type=chunk) - Capital expenditures (excluding acquisitions) historically range from **2% to 3% of total revenues** and are expected to be funded by cash and lease financing[257](index=257&type=chunk)[258](index=258&type=chunk) [Contractual Obligations](index=47&type=section&id=7.4.8%20Contractual%20Obligations) As of December 31, 2018, total contractual obligations amounted to **$354.9 million**, primarily consisting of long-term debt (**$290.6 million**), operating lease obligations (**$45.8 million**), and capital lease obligations (**$14.0 million**) Contractual Obligations (as of Dec 31, 2018) | Obligation | Total (in thousands) | | :-------------------------- | :------------------- | | Long-term debt | $290,620 | | Capital lease obligations | $13,987 | | Operating lease obligations | $45,762 | | Contingent consideration obligations | $2,365 | | Purchase commitments | $2,145 | | **Total** | **$354,879** | [Off-Balance Sheet Arrangements](index=47&type=section&id=7.4.9%20Off-Balance%20Sheet%20Arrangements) The company did not have any off-balance sheet arrangements with unconsolidated entities or financial partnerships during 2016, 2017, and 2018 [Critical Accounting Policies and Estimates Overview](index=48&type=section&id=7.5.1%20Critical%20Accounting%20Policies%20and%20Estimates%20Overview) Financial statement preparation requires significant estimates and assumptions, particularly in revenue recognition, long-lived assets, and goodwill, where actual results may differ significantly - Critical accounting policies requiring significant estimates and assumptions include revenue recognition, long-lived assets, and goodwill[265](index=265&type=chunk)[266](index=266&type=chunk) [Revenue Recognition](index=48&type=section&id=7.5.2%20Revenue%20Recognition) Most revenues are from short-term, time and material-based services, recognized over time, while product sales revenue is recognized at a point in time, generally upon shipment - Majority of revenues are from short-term, time and material-based services, recognized over time as work progresses[267](index=267&type=chunk)[270](index=270&type=chunk) - For multiple performance obligations, transaction price is allocated using the best estimate of standalone selling price, primarily based on price lists[268](index=268&type=chunk) - Product sales revenue is recognized at a point in time, generally upon shipment to the customer[271](index=271&type=chunk) [Long-Lived Assets](index=49&type=section&id=7.5.3%20Long-Lived%20Assets) Long-lived assets are reviewed for impairment when carrying value may not be recoverable, with a **$2.6 million impairment charge** recorded in Q3 2017 for the Products and Systems segment - Long-lived assets are reviewed for impairment when events indicate carrying value may not be recoverable[275](index=275&type=chunk) - An impairment loss is recorded if undiscounted future cash flows are less than the carrying amount, with fair value estimated using discounted cash flow analysis[275](index=275&type=chunk) - A **$2.6 million impairment charge** for long-lived assets was recorded in the Products and Systems segment during **Q3 2017**[275](index=275&type=chunk) [Goodwill](index=49&type=section&id=7.5.4%20Goodwill) Goodwill is tested for impairment annually or when triggering events occur, with a **$13.2 million goodwill impairment charge** recorded for the Products and Systems segment in Q3 2017 due to missed contract bids and lower projected cash flows - Goodwill is tested for impairment annually (**October 1**) or when events indicate fair value may be below carrying amount[276](index=276&type=chunk) - Fair value is estimated using income and market approaches, requiring significant judgment[277](index=277&type=chunk) - A **$13.2 million goodwill impairment charge** was recorded for the Products and Systems segment in **Q3 2017** due to missed contract bids and lower projected cash flows[276](index=276&type=chunk) [Acquisitions](index=49&type=section&id=7.5.5%20Acquisitions) The company allocates the purchase price of acquired businesses to identifiable assets and liabilities based on estimated fair values, a process involving significant judgment and often third-party valuation experts - Purchase price of acquired businesses is allocated to identifiable tangible and intangible assets and liabilities based on estimated fair values[278](index=278&type=chunk) - The valuation process requires significant judgment in estimating future performance, cash flows, discount rates, and economic lives, often utilizing third-party valuation experts[278](index=278&type=chunk) [Recent Accounting Pronouncements](index=49&type=section&id=7.6.1%20Recent%20Accounting%20Pronouncements) The company adopted ASU 2014-09 (Revenue) on January 1, 2018, with immaterial impact, and will adopt ASU 2016-02 (Leases) on January 1, 2019, expecting a **$35-40 million** balance sheet impact, while early adopting ASU 2017-04 (Goodwill) in Q3 2017 and completing Tax Act accounting by December 31, 2018 - Adopted **ASU 2014-09 (Revenue from Contracts with Customers)** on January 1, 2018, with immaterial impact[339](index=339&type=chunk) - Will adopt **ASU No. 2016-02 (Leases)** on January 1, 2019, expecting a **$35-40 million impact** on the balance sheet for operating leases, with no significant impact on income or cash flows[340](index=340&type=chunk)[342](index=342&type=chunk) - Early adopted **ASU 2017-04 (Goodwill)** in **Q3 2017**, eliminating Step Two of the impairment test[344](index=344&type=chunk) - Completed accounting for the tax effects of the **Tax Act** by December 31, 2018[346](index=346&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Mistras Group is exposed to interest rate risk on variable-rate debt and foreign currency risk from international operations, with a **100 basis point interest rate increase** raising annual interest expense by **$2.8 million**, and a **10% USD strengthening** decreasing operating income by **$0.5 million** - Interest rate risk primarily stems from variable rate indebtedness under the credit facility, influenced by short-term rates[280](index=280&type=chunk) - A **100 basis point increase** in interest rates would increase annual interest expense by approximately **$2.8 million**, based on **$181.7 million variable rate debt** at Dec 31, 2018[281](index=281&type=chunk) - Foreign currency exposure arises from operations in foreign locations (**Euro, British Pound Sterling, Brazilian Real, Canadian Dollar, Indian Rupee**)[282](index=282&type=chunk) - An unfavorable **10% strengthening of the U.S. Dollar** would decrease consolidated operating income by approximately **$0.5 million**, while a favorable **10% weakening** would increase it by **$0.6 million**[282](index=282&type=chunk) - The company does not use derivative financial instruments for speculative or trading purposes[283](index=283&type=chunk) [Financial Statements and Supplementary Data](index=50&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents Mistras Group's audited consolidated financial statements, including balance sheets, income statements, comprehensive income, equity, and cash flows, along with the independent auditor's report and detailed notes [Report of Independent Registered Public Accounting Firm](index=51&type=section&id=9.1%20Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on Mistras Group's consolidated financial statements and the effectiveness of its internal control over financial reporting as of December 31, 2018, excluding the recently acquired Onstream Holdings, Inc - **KPMG LLP** issued an unqualified opinion on the consolidated financial statements for the periods presented[288](index=288&type=chunk) - **KPMG LLP** also issued an unqualified opinion on the effectiveness of internal control over financial reporting as of December 31, 2018[288](index=288&type=chunk) - The assessment of internal control over financial reporting excluded **Onstream Holdings, Inc.** (acquired in 2018), which represented **2.1% of total assets** and **0.1% of total revenues**[289](index=289&type=chunk) [Consolidated Balance Sheets](index=53&type=section&id=9.2%20Consolidated%20Balance%20Sheets) The consolidated balance sheets show total assets increased to **$694.0 million** in 2018 from **$554.4 million** in 2017, driven by acquisitions, and total liabilities rose to **$423.0 million** from **$283.6 million**, primarily due to increased long-term debt Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2018 | Dec 31, 2017 | | :-------------------------- | :----------- | :----------- | | Cash and cash equivalents | $25,544 | $27,541 | | Accounts receivable, net | $148,324 | $138,080 | | Total current assets | $202,791 | $195,008 | | Property, plant and equipment, net | $93,895 | $87,143 | | Intangible assets, net | $111,395 | $63,739 | | Goodwill | $279,259 | $203,438 | | Total Assets | $694,037 | $554,441 | | Total current liabilities | $100,471 | $90,225 | | Long-term debt, net of current portion | $283,787 | $164,520 | | Total Liabilities | $422,963 | $283,649 | | Total Mistras Group, Inc. stockholders' equity | $270,897 | $270,619 | - Total assets increased by **$139.6 million (25.2%)** from 2017 to 2018, primarily due to increases in intangible assets (**$47.7 million**) and goodwill (**$75.8 million**) from acquisitions[298](index=298&type=chunk) - Total liabilities increased by **$139.3 million (49.1%)** from 2017 to 2018, mainly driven by a **$119.3 million increase in long-term debt**[298](index=298&type=chunk) [Consolidated Statements of Income (Loss)](index=54&type=section&id=9.3%20Consolidated%20Statements%20of%20Income%20(Loss)) Revenues increased to **$742.4 million** in 2018 from **$701.0 million** in 2017, with net income attributable to Mistras Group, Inc. improving significantly to **$6.8 million** from a **$2.2 million net loss**, and diluted EPS rising to **$0.23** from **$(0.08)** Consolidated Statements of Income (Loss) Highlights (in thousands, except per share data) | Metric | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 (Transition Period) | May 31, 2016 | | :-------------------------- | :----------- | :----------- | :------------------------------- | :----------- | | Revenue | $742,354 | $700,970 | $404,161 | $719,181 | | Gross profit | $207,874 | $187,712 | $117,004 | $203,008 | | Income from operations | $22,221 | $4,160 | $17,533 | $43,177 | | Net income (loss) attributable to Mistras Group, Inc. | $6,836 | $(2,175) | $9,568 | $24,654 | | Diluted EPS | $0.23 | $(0.08) | $0.32 | $0.82 | - Revenue increased by **6% from $701.0 million in 2017 to $742.4 million in 2018**[300](index=300&type=chunk) - Net income attributable to Mistras Group, Inc. improved from a loss of **$2.2 million in 2017 to a profit of $6.8 million in 2018**[300](index=300&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=55&type=section&id=9.4%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company reported a comprehensive loss of **$3.9 million** in 2018, a significant shift from a comprehensive income of **$10.8 million** in 2017, primarily due to negative foreign currency translation adjustments of **$10.8 million** Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 (Transition Period) | May 31, 2016 | | :---------------------------------------- | :----------- | :----------- | :------------------------------- | :----------- | | Net income (loss) | $6,845 | $(2,168) | $9,611 | $24,650 | | Foreign currency translation adjustments | $(10,752) | $12,919 | $(9,625) | $1,014 | | Comprehensive (loss) income attributable to Mistras Group, Inc. | $(3,921) | $10,748 | $(51) | $25,669 | - The company reported a comprehensive loss of **$3.9 million** in 2018, compared to a comprehensive income of **$10.7 million** in 2017[303](index=303&type=chunk) - The primary driver for the change in comprehensive income was foreign currency translation adjustments, which were a negative **$10.8 million** in 2018 compared to a positive **$12.9 million** in 2017[303](index=303&type=chunk) [Consolidated Statements of Equity](index=56&type=section&id=9.5%20Consolidated%20Statements%20of%20Equity) Total Mistras Group, Inc. stockholders' equity remained relatively stable at **$270.9 million** in 2018 compared to **$270.6 million** in 2017, influenced by net income, share-based payments, and foreign currency translation adjustments Consolidated Statements of Equity Highlights (in thousands) | Metric | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 (Transition Period) | May 31, 2016 | | :---------------------------------------- | :----------- | :----------- | :------------------------------- | :----------- | | Common Stock (shares issued) | 28,563 | 28,295 | 29,217 | 28,940 | | Additional paid-in capital | $226,616 | $222,425 | $217,211 | $213,737 | | Retained earnings | $71,553 | $64,717 | $91,803 | $82,235 | | Accumulated other comprehensive loss | $(27,557) | $(16,805) | $(29,724) | $(20,099) | | Total Mistras Group, Inc. stockholders' equity | $270,897 | $270,619 | $270,582 | $276,163 | - Total Mistras Group, Inc. stockholders' equity increased slightly from **$270.6 million in 2017 to $270.9 million in 2018**[306](index=306&type=chunk) - Accumulated other comprehensive loss increased to **$(27.6) million** in 2018 from **$(16.8) million** in 2017, primarily due to foreign currency translation adjustments[306](index=306&type=chunk) [Consolidated Statements of Cash Flows](index=57&type=section&id=9.6%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased to **$41.7 million** in 2018 from **$55.8 million** in 2017, while net cash used in investing activities significantly increased to **$155.5 million** due to acquisitions, and net cash provided by financing activities was **$114.0 million** from increased borrowings, resulting in a **$2.0 million** decrease in cash Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity (in thousands) | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 (Transition Period) | May 31, 2016 | | :-------------------------------- | :----------- | :----------- | :------------------------------- | :----------- | | Net cash provided by operating activities | $41,664 | $55,799 | $30,259 | $68,124 | | Net cash used in investing activities | $(155,450) | $(102,797) | $(17,374) | $(16,752) | | Net cash provided by (used in) financing activities | $113,969 | $53,045 | $(12,869) | $(40,378) | | Net change in cash and cash equivalents | $(1,997) | $8,387 | $(2,034) | $10,633 | | Cash and cash equivalents, End of period | $25,544 | $27,541 | $19,154 | $21,188 | - Net cash used in investing activities increased by **$52.7 million** in 2018, primarily due to **$139.9 million in acquisitions** (net of cash acquired)[308](index=308&type=chunk) - Net cash provided by financing activities increased by **$60.9 million** in 2018, mainly from **$175.2 million in proceeds from revolver borrowings**[308](index=308&type=chunk) [Notes to Consolidated Financial Statements](index=59&type=section&id=9.7%20Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on accounting policies, financial statement components, and disclosures, including a **$143.1 million acquisition** in 2018, an **$83.2 million increase in goodwill**, a **$5.9 million pension withdrawal charge**, and a significant increase in long-term debt to **$290.6 million** - The company completed one acquisition in 2018 for **$143.1 million in cash**, performing inline inspection services primarily for the midstream oil and gas industry[368](index=368&type=chunk) - Goodwill increased by **$83.2 million** in 2018 due to acquisitions, reaching **$279.3 million**; Intangible assets, net, increased to **$111.4 million** in 2018 from **$63.7 million** in 2017[371](index=371&type=chunk)[381](index=381&type=chunk) - A **$5.9 million charge** was recorded in 2018 for potential multi-employer pension plan withdrawal liability due to a significant reduction in unionized employees on a project[206](index=206&type=chunk)[455](index=455&type=chunk) - Long-term debt increased significantly to **$290.6 million** in 2018 from **$166.9 million** in 2017, primarily due to increased borrowings under the senior credit facility and a new **$100 million term loan A facility**[391](index=391&type=chunk)[392](index=392&type=chunk) - The company recorded **$1.7 million in income tax expense** in 2018 related to completing the accounting for the Tax Act effects from 2017, including adjustments for deferred tax liabilities and the transition tax[212](index=212&type=chunk)[429](index=429&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=88&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) There have been no changes in or disagreements with accountants on accounting and financial disclosure [Controls and Procedures](index=88&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2018, and internal control over financial reporting was also effective, excluding a recently acquired entity, with no material changes during the year - Disclosure controls and procedures were effective as of December 31, 2018[474](index=474&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2018, excluding the recently acquired **Onstream Holdings, Inc.**[477](index=477&type=chunk)[478](index=478&type=chunk) - No material changes in internal control over financial reporting occurred during the year ended December 31, 2018[479](index=479&type=chunk) [Other Information](index=89&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) There is no other information to report in this section Part III [Directors, Executive Officers and Corporate Governance](index=89&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for the 2019 annual meeting of shareholders - Information on directors, executive officers, and corporate governance is incorporated by reference from the **2019 proxy statement**[482](index=482&type=chunk) - Executive officer information is also available in Part I of this Annual Report[482](index=482&type=chunk) [Executive Compensation](index=89&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Executive compensation information is incorporated by reference from the company's definitive proxy statement related to the 2019 annual shareholders meeting - Executive compensation information is incorporated by reference from the **2019 proxy statement**[483](index=483&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=89&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Security ownership information is incorporated by reference from the company's definitive proxy statement; as of December 31, 2018, the company had **2.1 million outstanding stock options** and **1.1 million shares** available for future issuance under equity compensation plans - Security ownership information is incorporated by reference from the **2018 annual meeting proxy statement**[484](index=484&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2018) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options | Weighted Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :------------------------------------------ | :------------------------------------------------------------------- | :----------------------------------------------------- | :------------------------------------------------------------------------------------------- | | Equity Compensation Plans Approved by Security Holders | 2,105 | $13.47 | 1,143 | [Certain Relationships and Related Transactions, and Director Independence](index=91&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS,%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for the 2019 annual shareholders meeting - Information on related party transactions and director independence is incorporated by reference from the **2019 proxy statement**[488](index=488&type=chunk) [Principal Accountant Fees and Services](index=92&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information concerning principal accounting fees and services is incorporated by reference from the company's definitive proxy statement related to the 2019 annual shareholders meeting - Information on principal accounting fees and services is incorporated by reference from the **2019 proxy statement**[489](index=489&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=92&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists financial statements filed as part of Item 8, confirms the omission of other financial statement schedules, and provides a comprehensive list of exhibits, including material contracts and certifications - Financial statements are filed within **Item 8 of Part II**[491](index=491&type=chunk) - Other financial statement schedules are omitted as not required or information is provided elsewhere[491](index=491&type=chunk) - A list of exhibits includes various agreements (e.g., purchase, credit), corporate documents (certificate of incorporation, bylaws), equity plans, and certifications[492](index=492&type=chunk)[493](index=493&type=chunk)[494](index=494&type=chunk)[495](index=495&type=chunk) [Form 10-K Summary](index=96&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) There is no Form 10-K summary provided in this report

Mistras Group, Inc. (NYSE:MG) Q4 2018 Earnings Conference Call March 12, 2019 9:00 AM ET Company Participants Nestor Makarigakis - Group Director, Marketing Communications Dennis Bertolotti - President and Chief Executive Officer Ed Prajzner - Senior Vice President, Chief Financial Officer and Treasurer Jon Wolk - Senior Executive Vice President and Chief Operating Officer Conference Call Participants Edward Marshall - Sidoti Tahira Afzal - KeyBanc Capital Markets Chip Moore - Canaccord Operator Good mornin ...